US auto industry braces for labour talks

The uneasy labor peace which helped the US auto industry survive a financial collapse will soon be tested as the Detroit Three prepare for contract talks with the United Auto Workers.

"It's going to be a very tough negotiation," Joel Persinger, the chairman of UAW Local 5950 at General Motor's plant in Orion, Michigan, told AFP.

"It's mostly all about wages."

The union -- which had seen its ranks decimated in wave after wave of mass layoffs as the Detroit Three lost market share to foreign competitors -- agreed to major concessions in 2007 and 2009 in order to help GM and Chrysler emerge from bankruptcy protection.

The UAW's hands were tied when it went back to the table in 2011 because the terms of a federal bailout barred it from striking.

It has regained the right to strike now that the US Treasury has sold its stake in GM and Fiat Chrysler Automobiles has repaid its federal loans.

With sales booming, workers who haven’t seen a raise in eight years are looking to share in the profits from the industry's recovery. But with labor costs at US plants run by the Detroit Three still higher than those of their foreign competitors, automakers are looking to hold the line.

- Union wants a raise -

"These are the first negotiations out of the shadow of bankruptcy and the first negotiations since the 1990s that follow a streak of five very profitable years," said Kristin Dziczek, lead labor analyst for the Center for Automotive Research in Michigan.

"These are also the first negotiations where entry-level employees making second-tier wages will vote in large blocks on the terms of their own employment."

The union opens negotiations with all three companies simultaneously in mid-July but will pick a so-called 'target' company just ahead of a September 15 contract expiration deadline. The other two companies will be expected to follow the pattern agreement with modest changes.

"The UAW helped the entire industry get back on its feet," union president Dennis Williams said during a recent meeting with reporters at union headquarters in Detroit.

"We’ve been able to achieve some great things in the past few years. As you look around the industry, we see a lot of new products and new processes that have made these companies a lot of money."

The union wants a raise for the 140,000 union members covered by the contract and is looking at different models for "bridging the gap" in pay between legacy workers making $30 per hour and new hires who make roughly $16.50 under the current contract.

- Automakers want to cut costs -

Sergio Marchionne, the bombastic chief executive of Fiat Chrysler Automobiles NV, has insisted repeatedly the industry needs a new contract model. The old one doesn't work and profit sharing and incentive bonuses should become a larger part of the pay package of each worker, Marchionne has said.

He is also seeking to defend a labor cost advantage that comes with having 43 percent of Fiat Chrysler's US workers earning the lower entry-level wage, nearly double the percentage of such workers at GM and Ford.

GM has mounted something of a charm offensive ahead of the negotiations by announcing plans to invest $5.4 billion in plant improvements and create hundreds of new jobs over the next three years.

“Only through innovative problem solving are we going to see success,” Cathy Clegg, GM North American vice president of manufacturing and labor relations, said recently.

Ford's negotiators, while worried about rising health care costs, have also avoided making pronouncements that might antagonize the union.

"Our approach going into the contract is to make sure that we have a fair and competitive agreement that allows us to provide jobs for our people but will allows us to remain competitive and invest here in the US," Ford chief executive Mark Fields said recently.  

For its part, the union also has said it wants to avoid confrontation.

Cindy Estrada, the union's top bargainer at GM said this week, "If there is a strike, both of us will have failed."

Williams, however, said he is prepared for the worst and has raised dues to "build up the strike fund."

"I never go into negotiations without being prepared," Williams said. "But we believe we can get through collective bargaining without a confrontation. It’s not really on my mind."